Elon Musk’s curious Twitter war with bitcoin is expected to hit Tesla Inc.’s bottom line this quarter.
Mr. Musk is widely blamed by investors for starting the digital currency’s most punishing slide of the year after announcing on Twitter that Tesla would stop accepting bitcoin as payment for its electric vehicles. He added fuel to the fire earlier this month, tweeting breakup memes with “#bitcoin” and a broken-heart emoji. Bitcoin has slumped 30% since the original May 12 tweet.
Tesla had about $1.3 billion in bitcoin parked in its treasury at the end of the first quarter and announced the bitcoin purchase in February to “diversify and maximize returns on our cash.”
Software developer MicroStrategy Inc. and a handful of other companies, including payment app provider Square Inc., have made similar investments. Some have touted bitcoin as a store of value, or a more modern version of gold.
But companies holding bitcoin in their treasuries face an accounting risk: Because bitcoin and other digital assets are considered “indefinite-lived intangible assets,” rather than currencies, any decrease in their value below what the company paid for them—even a temporary one—can force a company to write down the value and take an impairment charge.